An Australian watchdog has launched civil penalty proceedings against a Chinese Communist Party (CCP)-owned food processing giant accused of meddling in local wheat prices.
The Australian Securities and Investments Commission (ASIC) has sued local subsidiaries of the China Oil and Foodstuffs Corporation (COFCO) for alleged price manipulation on 34 occasions.
The events were said to have taken place between January and March 2022.
The case before the Federal Court against COFCO International Australia Pty Ltd, and COFCO Resources SA, alleges the companies manipulated the price of ASX24 futures for Eastern Australia Wheat in January 2023 (WMF3).
ASIC alleges COFCO manipulated contracts, and placed orders shortly before the close of the day session of the commodity trading-focused ASX24, so that it could impact the daily settlement price for the WMF3 contract.
It is alleged that Nicholas McGaw, a wheat trader at COFCO International Australia, allegedly made the offers late in the afternoon.
ASIC claims Mr. McGaw emailed investment bank JP Morgan to say the company was protecting its short position on the contracts from another party bidding to push the price up.
This conduct is commonly referred to as “marking the close.” The trades were allegedly valued at around $100,000 (US$65,000).
ASIC alleges the practice causes prices not to reflect the genuine market conditions of an open market.
ASIC Chair Joe Longo said the companies had engaged in a repeated pattern of manipulation to benefit themselves to the detriment of others in the market.
“ASIC is committed to responding to market manipulation in energy and commodities markets,” he said in a statement.
“This conduct is illegal. It erodes trust and confidence in our markets, increases costs for participants, hurts farmers, food manufacturers, importers and exporters, and impacts the prices Australians pay at the checkout.”
Mr. Longo said fairness in commodities markets had never been more critical.
“Consumers and economies have felt the impact of distorted supply chains through the pandemic, the Russia-Ukraine war, and increases in the cost of living,” he said.
“We have the systems, people and powers to identify misconduct and will not hesitate to take action against those manipulating our markets.”
ASIC is seeking declarations and financial penalties against COFCO International Australia Pty Ltd and COFCO Resources SA.
The matter will be listed for a case management hearing on a date to be fixed by the Court.
What is COFCO?
COFCO was founded in 1949 and lists itself as a leader in the Beijing agricultural industry.The company’s website lists agri-products as its core business, including grain, oil, sugar, cotton, meat, and dairy, but it also has business segments in food, finance, and real estate.
COFCO’s website says it has been actively going global, making “bigger strides by continuously improving logistics and storage capacity worldwide to ensure a stable global supply chain.”
